It's been a rough year for a lot of companies out there. The fact that we've seen companies manage to gain ground on little more than a loss that was lower than the Wall Street consensus saw coming drives that point home wonderfully. For Snowflake (NYSE:SNOW) an unexpected loss sent shares into a decline in pre-market trading. Perhaps worse than the loss itself was the timing of the loss.
Leading Off Into a Loss
This was actually the first quarter that Snowflake had seen as a publicly-traded company, and the results were downright bizarre. The company, at one point, lost as much as 8% of its overall value in extended Wednesday trading, though some recovery was seen throughout the session.
The numbers tell the story here, even if it does sound slurred and rambling. The company posted revenue of $159.6 million, which is not only a fairly solid number, but also represents a gain of 119% against this time last year. It's only a slightly smaller growth rate than that seen last quarter, where it produced 121% growth.
The problem, of course, is what the company had to spend to get to that revenue growth. The company posted a hefty loss of $1.01 per share. While that represents a huge improvement over the same time last year, when it posted a loss of $1.92 per share, it's still a loss, and a pretty big one at that. Gross margin for the company went from 59.6% to 58.2%, which isn't encouraging either.
Future Projections Looking Up! …Sort Of
The company's fiscal fourth quarter, according to reports, will produce between $162 million and $167 million in product revenue, about 93% of that which was seen in the fiscal third quarter. Should that number be achieved, the company notes, that will represent product revenue for the year increased somewhere between 97% and 103%. The company has 65 customers to its name so far, and they're putting up a combined total of around $1 million in product revenue over the last 12 months.
It's looking to try and improve its gross margins, reports note, by getting better pricing out of cloud vendors, especially Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN). With some concessions, the company should be able to hit margins around 75%. Moreover, the company has also gone on a hiring binge, augmenting its sales operations to try and pull more business into the company.
Analysts Seem a Little Less Convinced
Meanwhile, according to our latest research, the company is sitting at a consensus opinion of “hold”, though the price target is on a steady upward climb. Since the company hasn't exactly been around long as a company, analyst perspective is limited here, but it's unchanged from a month ago. The company currently has two “sell” ratings, 11 “hold” and nine “buy”, which is where it was this time last month. The price target, meanwhile, has gone from $264.95 to $276.30.
Interestingly, just today, eight separate analysts have raised their price targets, most of which are now over the level the company is currently trading at; analysts from Goldman Sachs to Mizuho and beyond are putting a little more faith in the company's ability to gain; five out of eight analysts who hiked their price target today have a positive outlook on the stock going forward.
A (Familiar) Boost to Analytics
Snowflake's biggest plus here is that it operates in the big data space. Big data is increasingly popular lately, especially as it finds itself so often the reason behind big cost savings or improved sales. With Snowflake's operations working to break down so-called “data silos”, Snowflake's tools can help improve data analysis and give companies a better look at their condition.
The problem, however, is that there are a lot of companies getting into this space. It's no longer enough to simply have a big data analytics tool; it now has to do more or produce better outcomes than its competitors. While Snowflake is doing a solid job of getting customers in—it has deals with Capital One Financial and Goldman Sachs—it's also facing a lot of competition to get those deals in. That likely explains why the company is augmenting its sales force, to try and pull more deals into play.
Snowflake has a solid product and a decent trajectory lined up. If it can get its expenses in line and improve its margins, it could be a solid competitor going forward. But never forget, it's sharing the market with a lot of other operations out there. Those considering buying in here will need to watch this company carefully to make sure it can effectively take on that growing bloc of competitors.
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